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DAVOS, Switzerland (Reuters) – The plunge in digital asset prices over the past year has allowed investors to focus on the “real value” of this new technology, distributed ledgers and the smart contracts they can build on top of it. Former Reserve Bank of India Governor Raghuram Rajan said Wednesday.
“The idea that cryptocurrencies will somehow maintain their value while fiat currencies collapse is nonsense,” Rajan said at the World Economic Forum annual meeting in Davos, Switzerland.
“Fiat currency wins in terms of who is more trustworthy,” he said in an interview with the Reuters Global Markets Forum.
The broader cryptocurrency market will shrink by $1.4 trillion in 2022, with Bitcoin losing 60% of its value. But it jumped 26% in January, jumping 22% in the past week alone, above the $20,000 level and on track for its best month since October 2021. .
Cryptocurrencies took a hit to credibility in November when crypto exchange FTX, valued at $32 billion a year ago, filed for bankruptcy protection in November. US prosecutors have also accused its founder Bankman-Fried of orchestrating a “grand” fraud that may have hurt investors. Billions of dollars to customers and lenders.
Rajan expects the US Federal Reserve (Fed) to continue raising rates for now, but is looking to see if there are signs of slack in the labor market.
“The fact that 200,000 jobs are being created per month suggests that we still have a long way to go,” he said.
Rajan believes the Fed can revive the economy by cutting interest rates, so a mild recession won’t be a problem for the US central bank.
But one source of concern, he said, may be the tight labor market, as no one wants to lay people off given how difficult it was to hire them in the first place.
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Reporting by Divya Chowdhury in Davos and Savio Shetty in Mumbai.Editing by Jonathan Ortiz
Our standards: Thomson Reuters Trust Principles.
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